Commentary: Worst week? Almost worst month, ever

Tough month for Showbiz 50

Two days left, and we have a real shot at making the top 10 list of the worst months for stocks in U.S. history.

The S&P 500 is down 19.3% so far in October, already qualifying it for the ninth-worst month ever.

Before a powerful rally Tuesday, it looked like we might have had a shot at snatching first place away from September 1931. In that month -- the early stages of the Great Depression -- the S&P 500 fell 29.94%.

Fortunately, for those of us whose 401(k)s are tied up in entertainment stocks, we've fared slightly better than the broader averages this month -- unless, of course, you've been banking on the big media conglomerates, all of which have crashed further than the S&P 500.

The Hollywood Reporter Showbiz 50 has dropped only 16% this month, but the conglomerates are down even more: Disney has lost 22.1%, followed by Time Warner (-23%), News Corp. (-23.8%), Viacom (-27.7%), Sony (-28.8%) and CBS (-39.4%).

Despite Tuesday's 889-point rally on the Dow, Wall Street is increasingly convinced that the U.S., and perhaps the world, is in recession. BMO Capital Markets delved head-first into the topic this week by telling clients which stocks to own during a mild recession and which to own during a severe one.

The lists of dozens of stocks in each category includes only a handful of media companies. Most significant, because they were called stocks to own in both scenarios (severe or mild recession), were Google and Regal Entertainment Group.

BMO has a $462 target on Google and an $18 target on Regal. The stocks closed Tuesday at $368.75 and $11.49, respectively.

During a mild recession, BMO also recommends Electronic Arts and Entravision. For a severe recession, they also recommend Apple, CBS, GameStop and Thomson Reuters.

"It is clear that economic activity has been hampered by the credit squeeze, and it appears all but certain that we are headed into, if not already in, a recession, with the only question being the depth of the downturn," BMO said in a letter to investors.

CBS seems the most controversial of BMO's recession picks, especially since just last week Pali Research analyst Richard Greenfield initiated coverage of CBS with a "sell" recommendation.

Greenfield's most important point is that the fat 11.5% dividend yield CBS pays to its shareholders is "unrealistic." If CBS cuts the dividend, then the stock is overvalued.

Greenfield has a $5 target on the stock, which closed Tuesday at $8.83.

Regardless of where the broad markets finish the month, it's a safe bet that the Showbiz 50 will have the worst month in its almost three-year history. With two days left, not one stock in that index is higher.

Exceptions abound, but entertainment stocks with a technology focus have outperformed, relatively speaking, and radio stocks are bringing up the rear. The worst performers on the index are Entercom Communications (down 89% in October), Cumulus Media (-74%), Belo Corp. (-66%), Liberty Media Interactive (-56%) and Warner Music Group (-55%).

With stocks trading so much lower today than they were a month ago, investors have been preparing their buy lists.

Miller Tabak analyst David Joyce reiterated his "buy" recommendations on Dolby Laboratories, Live Nation, Lionsgate and Disney. Lazard Capital Markets analyst Colin Sebastian said that Activision Blizzard is his "top pick" in the digital media and Internet sector, specifically noting his enthusiasm for the video games "World of Warcraft," "Call of Duty," "Guitar Hero" and new James Bond title.

And in a research note dubbed "Bunkering down" from RBC Capital Markets, a group of analysts call Barry Diller's InterActiveCorp. their "best long idea," calling the stock -- because of its $9 per share in cash -- "a great place to hide out."